Ladies and gentlemen, welcome to Cofinimmo's half-year results of 2023. All participants are in listen-only mode. To ask a question, you may press star followed by the number one. This call is being recorded. If you have any objections, you may disconnect at this point. The speakers of today are Jean-Pierre Hanin, Jean Kotarakos, and Yeliz Bicici. I propose to start. Mr. Hanin, the floor is yours.
Thank you. Good morning, ladies and gentlemen. Thank you for being with us this morning for the presentation of our Cofinimmo's 2023's half-year result. I have a few colleagues around me in this conference room, Jean Kotarakos, CFO, Yeliz Bicici, COO, Offices and Real Estate Development, Hanna De Groote, Head of ESG, Maxime Goffinet, Head of Treasury, Jonathan Hubert, Head of Control, and Philippe Etienne, Head of External Comm. As usual, we will try to go rapidly through the presentation to have enough time for Q&A. Let's start with the highlight of this first semester 2023. As you know, Cofinimmo's portfolio is in transformation, with the healthcare segment now accounting for 73% of the group's portfolio. The group has achieved solid results in a volatile and challenging macroeconomic context. The net results from core activities has reached EUR 114 million.
This is a 5% increase compared to H1 2022. The total of the investment already closed, and those that are already scheduled to be closed by the end of the financial year, amount to approximately EUR 200 million. That represents 2/3 of our divestment objective of EUR 300 million for this year. In H1, we have already completed EUR 128 million of divestment, mainly in offices, which is in line with the forecast. The gross rental revenue are up 8.8% over the last 12 months, and the occupancy rate stays high at 98.5%, and the residual lease length reach 13 years. We also continue to manage efficiently our financial structure. Let's illustrate this. Our interest rate risk is hedged at 99%.
This percentage range, ranges between 85% and 100% for the period 2023-2027. Our average cost of debt stays low at 1.4% and is expected to remain at this level this year. Our debt-to-assets ratio stand at 47.6%. This is essentially due to the seasonal effect of the payment of the dividend in June, just before the end of Q2. We expect this ratio to drop to 45.6% by the end of this year, based on the current assumptions. Our headroom on committed credit lines amount to EUR 686 million, and as you know from our previous reporting, all maturities of 2023 were secured. Based on this, we confirm our gross dividend outlook for the 2023 financial year at EUR 6.20 per share.
Last but not least, on the ESG side, we continue to be a green leader. You will recall that back in February, we were included in the BEL ESG Index launched by Euronext. In April, Cofinimmo has been listed in the Financial Times 500 Europe's climate leaders. We are the only bedroom property company in this list. We have also got several new brand certificate for healthcare assets. Our company profile and strategy is well known by all of you, let's go directly to slide number 8. The chart on this slide illustrates the transformation of the portfolio towards healthcare. You can see that since 2018, healthcare real estate grew from 45%- 73% in our portfolio. In the same time, the offices segment went from 38%- 20%, the distribution network segment was reduced by more than half.
As you know, we own property in nine European countries, and at the end of June, 47% of Cofinimmo's total portfolio is located outside of Belgium. I'm now on slide number 10, which illustrates, again, the ongoing portfolio transformation. If we cumulate divestment deals, both in offices and in distribution networks, that are already realized and those to be closed until the end of this year, we are already at EUR 200 million. This represents 2/3 of our full year target at EUR 300 million of divestment. On the right sidebar chart, you see the realized divestment in offices in H1, amounting to EUR 109 million. Since 2005, net divestment in offices are almost at EUR 755 million. We also have almost completed the disposal of Cofinimmo one, which are the MAAF insurance agencies in France.
We should be able to divest this entire portfolio by Q3 2023. We'll come back on this later. On the healthcare acquisition side, on the left bar chart, we have done for EUR 151 million of investment over the first half year, and we are in line with the outlook. On slide 11, you can witness our accelerated portfolio growth since 2018, on average, 12% per year. In the meantime, we kept the debt-to-assets ratio under control, far below the legal covenant. Let me remind you that the H1 figures of 47.6% include the seasonal effect of the payment of the dividend. The net zero investment budget for 2023 was designed to have a neutral effect on the debt-to-assets ratio between the year and 2022 and 2023.
Cofinimmo's market cap was approximately EUR 2.3 billion at the end of June, and is now around EUR 2.4 billion. The daily liquidity remains sound. Now on slide 14. If we look at sustainability, we continue to set the tone and are seen as a very credible player by all our stakeholder. This was again illustrated during H1. Let me give you some example. You already know that earlier this year, Cofinimmo was included in the new BEL ESG Index, launched by Euronext, and that on the ESG financing side, we have been added to the top SBTI, 1.5 degree ESG bond issuer by Euronext. SBTI, as you know, is an acronym for Science-Based Target Initiatives. On top of that, Cofinimmo is part of the Financial Times list of 5 Europe climate leaders.
Among the eight Belgian companies that are part of that ranking, we are the only real estate company, as already highlighted earlier. Last but not least, we have also been granted several new green certificates. I will go now to slide number 20 to talk about our property portfolio. You see, the occupancy rate remained high at 98.5%. You also see on this slide the top 10 list of our tenant. Please note that Clariane is the new name of the Korian Group. Please allow me to say a few words on Orpea. The voluntary reconciliation procedure has resulted in an agreement on the restructuring of Orpea financial debt that was validated by the Commercial Court of Nanterre earlier this week.
It provides for the French state, through the Caisse des Dépôts et Consignations, to acquire a majority stake in Orpea, and for the conversion of part of Orpea's debt into capital. Orpea should therefore go on with this refoundation strategy for the benefit of its resident, employee, and their families. Let's move now to slide 21. The overall weighted average residual lease term remains stable at 13 years. It's even at 15 years for healthcare. Compared to last year, yields are only slightly expanding at 5.8% growth and 5.4 net. Overall, our average net yield stayed well above 5%. Now, in the absence of Sebastien Berden, who could not join us today, let me take you through the highlight of the healthcare segment, and I'm on slide 24.
You see that our investment in healthcare illustrates our mission to consolidate our leadership in healthcare real estate in Europe. Doing so, we are very active in participating to the expansion and renewal of the healthcare property portfolio in Europe. You see the nine countries where we are active in. We continue our diversification within the healthcare sub-segment, which is a clear differentiator from our peers. Despite the headwind, we maintain our investment activity in high-quality healthcare real estate for approximately EUR 150 million. The fair value of our healthcare segment amount to EUR 4.5 billion. We own now 308 sites for above 1.7 million sq meters . The following slide record all the acquisitions that we have made through the first semester of this year and our acquisition earlier this month.
Let's go now to slide 26. Let me give you a few words on one Dutch and one Belgian deal we made during this semester. In Hilversum, a city of 90,000 inhabitants, 20 kilometers from Amsterdam, we completed in Q1 the delivery of an ultra-modern care clinic for the Tergooi MC on a brand-new hospital site. The building houses a number of outpatient clinics, such as dermatology, ophthalmology, plastic surgery, oral surgery, and aesthetic medical center, and a diagnosis studio on a total surface of 6,700 sq meters. The use of new technology and energy efficiency application made the healthcare clinic a sustainable A+ high-tech building in which high-quality care is provided. A triple net, net lease agreement has already been concluded for the care clinic for a fixed term of 20 years. The investment budget amounted to approximately EUR 30 million.
In Belgium, on slide 27, we acquired a very modern nursing and care home near the city of Liège, the 4th largest city in Belgium, through a contribution in kind. You will remember that this structuring boils down to paying for an asset or a PropCo with newly issued shares. It does offer the double merit of acquiring an asset and strengthening our shareholders' equity at the same time. The Jardin d'Ameline, that's its name, is a premium asset of more than 10,000 sq meters. It was built in 2017 and expanded with a new wing in 2020.
... This modular and flexible site has an excellent A-level energy performance. It's fully operational and offer 111 bed nursing and care home, 43 assisted living apartment, as well as five day care beds. The triple net lease is signed with operator Aurelia, Aurelia for 27 years. I will now give the word to my colleague, Yeliz Bicici, which will highlight some project in the geography she is responsible for.
Thank you, Jean-Pierre. Good morning to everyone. As you can see on slide 26, in Germany, we have completed the development of two innovative healthcare sites in Goch and in Wiesen. Both projects have an energy label A, and are designed as environmentally friendly healthcare campuses, integrating a variety of care and living options for their residents. These are parts of a larger pipeline of nine assets in the North Rhine-Westphalia region, signed in November 2020, and of which now three assets have been completed. After the completion and entry into the consolidation scope of these two sites, as well as the one of the site in Munich, delivered in 2022, more deliveries are still planned in the coming quarters.
With the delivery of all sites, we will have a total of 1,200 units, all to be operated by Schönes Leben Gruppe, with leases with a fixed term of 25 years. On the same slide, you see that in Finland, we had two projects completed in H1, in Kuopio and in Helsinki. Both assets represent accumulated investment value of EUR 36 million. In Kuopio, the nursing and care home offers 75 beds, spread over a total surface area of approximately 4,200 sq meters. A double net lease has been concluded with operator Nonna Group for a fixed term of 20 years. The level of energy performance of the building is A. The nursing and care home in Helsinki offers 83 beds, spread over a total surface area of 4,000 sq meters as well.
A double net lease has been concluded with operator Attendo for a fixed term of 15.5 years, and the level of energy performance of the building is B. We can now move on to slide 29 for the breakdown of our distribution networks, which is now mostly comprised of the Pubstone portfolio. At end June 2023, this segment represents a fair value of almost EUR 500 million, that cover together 313,000 sq meters and now count 877 sites. This is almost exclusively from Pubstone, for which I remind you that we have a long-term contract with AB InBev, both in Belgium as in the Netherlands. On slide 30, an update on the other part of the distribution network, which is Cofinimmo. It is composed of insurance agencies of French insurer MAAF, which are almost all divested.
At this stage, 252 assets have been already sold, for a total fair value of almost EUR 110 million. There's only 13 remaining assets in the process of being sold, and we are confident that we will complete this disposal by the end of Q3 this year. Let's now talk about the office segment as of slide 32. The fair value of the office segment represents EUR 1.2 billion at end June 2023, versus EUR 1.3 billion six months ago. It represents 51 sites for approximately 400,000 sq meters. On slide 33, you can see on the map and the bar chart that our aim is to create value through capital recycling. We keep the largest footprints within the Brussels CBD, which accounts for 72% of Cofinimmo Offices portfolio.
We are also speeding up the divestments in the decentralized or peri-city regions, as well as some buildings in the CBD, which we divest for ESG reasons. The following slides give a chronological update on this. Slide 34. As a reminder, in Q1 2023, we had divested Mercurius & Georgin for approximately EUR 35 million. Slide 35. In Q2, we signed no less than 5 divestments, you see the name of the buildings on your slide, for approximately EUR 82 million. On slide 36, you may remember that we had signed the acquisition of the Loire 89 building in October 2022. We have closed that deal last month. The building, Loire 89, is ideally situated in the heart of the CBD, next to our next to Loire 85, which we already own. This will allow us to optimize a combined redevelopment towards a new sustainable flagship.
I will now hand over to Jean Kotarakos, our CFO, to guide you through the financial results.
Thank you, Yeliz, good morning, everyone. For the overall portfolio, we can see on slide 38 that the gross rental revenues grew almost 9% year-over-year. This represents a like-for-like rental growth of 6.4%, mainly driven by indexation. On slide 39, we see that the net result from activities, which is the same than the EPRA earnings, reach EUR 114 million, up 5% compared to prior year and ahead of the outlook for 2023. This gives us an EPRA EPS of EUR 3.47 per share, also ahead of the outlook. Let's have a look at the other items that bring us to the IFRS net result on slide 40. The IFRS net result amounts to EUR 27 million, lower than the EUR 325 million of last year.
The change in the net result is mainly due to the fact that the increase in the net result from activities is lower than the decrease in the fair value of investment properties and hedging instruments, which are mainly non-cash items, that between H1 2022 and H1 2023. Let's focus on the result on the portfolio. It amounts to EUR -75 million versus EUR +78 million in H1 2022, as you can see on the table. The main caption in that result, called changes in the fair value of investment properties, is negative at end of June 2023. Without the initial effect from the changes in the consolidation scope, the changes in the fair value of investment properties stands at -1.0% over the first six months of 2023.
This is due to a zero, to a - 0.7% change in the healthcare portfolio, with differences per country offsetting each other partially, and to +0.2% change in the distribution network portfolio, combined with a 2.7% decrease in the value of the office segment, which represents only 20% of the consolidated portfolio. Regarding our balance sheet structure on slide 41, there are no surprises. The broad balance of divestment and investments during the first six months of the year is reflected in the stability of the total balance sheet. The total assets is indeed stable and overpasses EUR 6.8 billion, and 91% of it are investment properties at fair value, financed by EUR 3.5 billion of equity and EUR 3.3 billion of financial and non-financial loans.
On slide 42, we analyze the change of the debt-to-assets ratio between 2022, at that time it was 45.6%, and end of June 2023. Now it is at 47.6%. These deserve some explanations. The higher ratio compared to December 2022, comes essentially, and primarily from the seasonal effect of the dividend payment that is paid at the end of the second quarter, accounting for +3.1% in the waterfall that you see on the screen. The balance between investments and disposals adds 0.5%. Thirdly, the mark to market of investment properties, I've just commented, accounts for +0.5%.
This is offset by the dividend paid in new shares for -0.7%, of the optional dividend that we paid in June, and the accumulated cash flow over the half year for -1.7%. Thanks to the favorable effect of the 2 contributions in kind, carried out in July, and the accumulation of cash flow in H2, we expect the debt-to-assets ratio to drop to 45.6% by the end of the year. This is, of course, set out under the assumption that the change in fair value of asset in H2 would be in line with the change in fair value of asset in H1.
On slide 43, depending on the net asset value definition, you find the and I said that depending on the NAV definition, you find the most relevant, you can see that the NAV per share is somewhere between 102 and 112 EUR per share, below the ones of 2022. I can comment here on the evolution of the IFRS NAV since 2022, where it stood at 110.74 EUR per share versus 104.80 EUR per share today, meaning, in fact, that it decreased by 5%. The main driver behind the decrease is simply the deduction of the 2022 dividend in Q2 2023 for 6.20 EUR per share. Let's have a look now at the financial resources as of slide 45.
To date, we raised EUR 80 million of equity through contribution in kind in Q3, and the optional dividend in Q2. We see that these kinds of equity issuance are still possible despite market headwinds. On the debt capital markets, nothing new since January 2022, when we issued with success our second sustainable benchmark bond of EUR 500 million at conditions one can only dream of today. More important here is that our S&P credit rating was confirmed in March 2023, with the report released in May. The long-term rating is still triple B, with stable outlook, and the short term is A2. As you can see on slide 47, we managed to realize few but important refinancing operations, and we did this at credit spreads comparable to those witnessed in H2 2022.
Please remember that there is no long-term debt maturing in 2023, thanks to the refinancings carried out last year and at the beginning of this year. All in all, we have now more than EUR 2.6 billion in sustainable financing under the form of several instruments, including a sustainable commercial paper program. That was on slide 48. Slide 49 highlights the ongoing access to diversified funding sources, among others, the relation with 20 leading, leading banks, sorry. The average debt maturity now amounts to four years, and that is a rounded figure, but it, because it's nearly 4.5 years. At the same time, the average cost of debt has only slightly increased in line with the budget, at 1.4% at end of June, versus 1.2% in 2022.
We currently expect to remain at the level of 1.4% throughout the financial year. Slide 51, as I already highlighted, we can see that we have no maturity left in 2023, and that the debt maturities are well spread. On the 30th of June, the headroom on the committed credit lines was about EUR 686 million. On slide 52, we can see that 99% of the group's current debt is hedged, Between the years 2024 and 2027, the hedging ratio ranges from 85%-100%. This puts us in a comfortable situation in the current uncertainty, sorry, in the current uncertain interest rate environment. Now, I hand over to Jean-Pierre for the highlights on our 2023 outlook.
Thank you, Jean. On slide 54, you will find a breakdown of our initial 2023 investment and divestment budget, as we published it last February and confirmed end of April. We just added a footnote highlighting the fact that the investment budget of EUR 300 million is excluding the acquisition through contribution in kind, since they have a favorable effect on the debt-to-assets ratio. You can see here in the pie chart on the right, the lion share of the investment of EUR 300 million goes to healthcare real estate, of which EUR 151 million has already been done in H1. On the left pie chart, the amount of four offices are mostly CapEx related.
On the divestment side, if we take into account what we have already done in H1, which is EUR 128 million, plus the additional divestment expected to close by the end of 2023, we stand at approximately EUR 200 million, well on track to realize our divestment objective for EUR 300 million for the full year. This implies that the net investment would then be nil, excluding the contribution in kind and be neutral on the debt-to-assets ratio, based on the budgeted assumption. This give us, as shown on slide 55, a portfolio outlook for this year of approximately EUR 6.4 billion, after execution of the current development pipeline. I will end this presentation with the outlook for 2023 on slide 56.
Our initial outlook for this year stood at EUR 6.95 per share, at the level of the net results from core activities. This take into account the budgeted divestment and dilution from capital increases known at that time. Taking into account the fact that we are ahead of budget in H1, and that there have been unbudgeted capital increase in Q2 and Q3, we are in a position to confirm our EPS target at EUR 6.95 per share, both deviation from the budget offsetting each other. For your convenience, we also updated the line showing the expected denominator for the computation of the 2023 EPS. Those figures allow us to confirm the outlook for the gross dividend at EUR 6.20 per share for 2023, stable compared to 2022.
We want to thank you for all your attention, and we are here now to answer your questions. Who is taking the first question?
Excuse me, participants. For the question and answer, if you wish to ask a question, please press star followed by one, and then make sure to unmute your phone and record your name clearly when prompted. Your name is required to introduce your question. To cancel your request, you may press star two. Again, star one to ask a question. Speakers, we have a couple in queue. Our first question comes from Frederick. Your line is now open.
Hey, good morning. Can you hear me?
Yes. Hello, Frederick.
Hi. It seems also that there has been an issue during the presentation on the, on the, on the WebEx platform. Apparently there was no sound for more than five minutes, you know. Just doing several questions on my side. The first one, considering the lack of transaction in the nursing home market, could you comment on the way appraise or look at your healthcare portfolio today? Do they apply a discount to less solid operator, or do they look all asset the same way? I guess my question is: Do you see a big wide spread on valuation in your healthcare portfolio today?
Yeah.
That's the first question.
Well, there is no, no change in the valuation methodology. Already I would say, before this turbulent time, experts, whatever, in the healthcare and other segments, are always looking on the line by line, and they do not apply, you know, per principle or definition, a discount whatsoever. As you know, we have been able to pass on indexation fairly well, which of course, is an important element in the valuation methodology. There is not at all a discrimination among healthcare assets, or other type, I would say, or element in their evaluation part. This was for your first question. Can you repeat the second question, Frederick?
I, I haven't asked it yet. I ask question by question. The second one is a bit related to what you, what you say, it's linked to operators. If you look at the difference between, and it was already the case in Q1, but if you look the difference between indexation and like-for-like rental growth in healthcare, you see it's a, it's a negative spread. If you do the math, you come roughly at EUR 2.3 million, that you may have been given as an incentive to some operators. I guess the question I have is, do you feel confident that it will be enough for H2, or do you see other tail risk in your portfolio?
Well, you know, so far we feel confident. You know, the situation among operators and, and mostly I would say in Germany, globally on the market, is not yet totally settled. Mainly due to the lack of staff, which has always been a key issue, but which is today an even higher issue, combined with higher costs. Since, as you may remember, I've already highlighted this, that this collective bargaining agreement, which has been basically concluded on the 1st of September of last year, make the total personal cost for many operators higher costs.
You know, we, so far as we look at our portfolio, based on the information we have today, you know, it's only a, a marginal part, which, basically, are, under closing monitoring from our side. What we have done today, based on what we know, should allow us to continue.
Okay. Now, well, it's, it's well monitored. That's what you said?
Yeah, yeah. Yeah, yeah.
Okay. And maybe the last one for me, if I read the press release correctly, you stated that the core results are a bit higher than the initial outlook you gave in February. I guess the outlook you gave early February did not include a recent contribution in kind. Is it a reason why you don't increase the guidance today for full year, or are you prudent for other reason in H2?
Well, indeed, back in February, we didn't know whether we would do stock dividend, optional dividend or not, and the contribution in kind is always something, you know, until the last minute, you don't know whether it will go through or not. We are indeed cautious also for the second half of this year, as usual. I think you know us quite well, Frederick, and we prefer to stay disciplined and be like this.
Merci, Jean-Pierre.
Thank you, Frederick. Next question, please.
Our next question comes from Steven. Your line is now open.
Hi, good morning. Thank you for taking my questions, of course. I have, three questions. First is, what is the target or expected net yield for new Prime Healthcare acquisitions for the most relevant countries? Let's start with that.
I don't know, frankly speaking, because there are not many transactions on the market. You know, I have not seen a lot in the last weeks and months. There are some larger portfolio that are expected to be on the market as of September, I heard. For example, I think that Icade Santé is supposed to market its international, which means outside of France, portfolio. Frankly speaking, if I look at the last six months, there were rumors about portfolio that were supposed to be marketed and that were never, at least to our knowledge, being in the market. You know, I cannot tell you today what would be the new yield.
Okay, clear. What are you willing to pay? Let's say, the OPEH assets, say, and then let's look at Prime, good tenant, et cetera. What are you willing to pay? Is that over 6% or lower is also okay for you?
Well, you know, you know the reality of financing, yeah. We have to take it into account. Basically, if you would take long-term financing today, fixed rate, it would be around 4.5%, you know, at best. We have to be to take this in reality, and frankly speaking, as there are not a lot of transaction, we have not looked exactly, you know, how much we would be willing to pay, because we are so busy with our divestment, that today, we are more a seller than a acquirer. Clearly, you know, as usual, we would have to take this new financing condition into consideration.
Okay, clear. Thank you. Maybe a different question on occupier health. Could you provide some metrics on occupier profitability, I don't know, main rent coverage ratio, or underlying occupancy for the most important countries?
Well, the only recent data I have is on France, because you may have spotted that LNA Santé has disclosed a few days ago their occupancy ratio, which was quite healthy and progressing since last year. It's a bit too early in the year to have really, you know, picture of occupancy. The trend clearly is positive in most countries, and I think the only element which might be hindered to a fast recovery is basically the stage of staff, which was already before, you know, the COVID, you know, the first priority of many operators and which is still today. It's clearly on a good direction in Europe.
Okay, clear. Thank you so much.
Thank you, Steven. If you have another question, now please answer to the next one.
Our next question comes from Francesca. Your line's now open.
Yes. Hello, good morning, everybody. I escalate the question of Steven. Referring to the EUR 150 million acquisition you finalized so far, can you disclose the average yield on these latest transactions?
You mean for the, the pipeline we have done, so, so far or for... I'm not sure. Could you be more precise of what you are-
For the investments that you've finalized so far, what's the average yield?
Oh, you, you mean the, the very few transaction we have done?
Yes.
It's basically.
Yeah
... You know, the, the, the market rate. I've not done an average because we don't have many acquisition outside our pipeline. It was so marginal, then, doesn't really change the bottom line, because, as you know, the vast majority, vast, vast majority of what we have done this year is basically executing the previous committed pipeline.
Okay. Then you move to indexation-
That's why, that's why it's very difficult to say what is today-
Yeah
... the price of a healthcare asset on the market, because there are not, you know, many transactions.
Yeah, understood. Understood, and, and it's fine. Question on indexation, have you already started discussing with tenants about indexation for 2024? What is a bit your feeling, is anyone asking for cap mechanism, for example, or other mechanism?
Yeah.
Is this part the negotiation dynamics, negotiation conversation with them?
Yeah. Well, you know that indexation are passed through at an anniversary date of contract. Anniversary date are spread all over the year, so it's, I would say, almost an ongoing exercise. We are not yet discussing 2024, but it's clear that basically the big height is, is almost behind us, because we have passed, I would say, the, the, the largest part and the expectation, if one can still believe in some macroeconomic forecast, is that it should go down after the end of this year. We are not yet, you know, forecasting what will be the indexation in September 2024.
It's, you know, far too, I would say, based on anticipation that, basically today are really difficult to firm up.
Okay. Changing again, arguments on the disposal, what do you expect for this final EUR 100 million tranche that needs to be finalized until December? How confident-
Yeah
...you are on, what kind of visibility you have so far? Can you give some color on, on this?
Yeah. Well, you know, I prefer to look on what we have achieved so far. You know, I remember that when we announced back in February, a target of EUR 200 million, many, many people were telling, like, last year, by the way, that this was a too ambitious target and not achievable. I understand this comment because indeed, it's difficult market environment, and for those who have never divested assets, it's a total new process. As you will appreciate in Cofinimmo global track record over the year, we are used to prepare divestment. It's not something you do overnight. When we had announced EUR 200 million, we had, of course, already advanced discussion on some of assets.
It's clear that it's a process in the current environment, where you also need to make your opinion about the financial sustainability of your buyer. That's why it's a lengthy process, because on both sides, there are a number of analysis that takes more time. That's why we are quite proud that basically we have already engaged two-thirds of our objective in mid-year. Now, to be fair, sorry, you know, in July and August, the activity is quite low. You know, I would have a better view somewhere September, October. Having already secured or engaged two-third of our portfolio, I think the EUR 20 million is not unreachable. Like, maybe one could have had this perception back in February, where, you know, the EUR 300 million looks like the Everest.
Today, it's still, you know, something we need to deliver, but I think the fact that we have been able to already deliver what we have announced, show our commitment, show our discipline, and show that we are also a reputable counterparty that can engage into process, that do not deliver surprise in terms of quality of the assets that we are delivering. That's where we stand today.
I know it might be a bit early to ask, but you think that the net zero investment approach will be replicated even for 2024. Is this sustainable?
Well, you know, there are still many question marks about 2024, so I would not be arrogant and give you a firm answer, and look smarter of the rest of the market. I think, you know, some people, and today, at least, that's what I hear, believe that the price should stabilize by the end of this year. That central bank, because of the real economy, delivering poor results, maybe will continue to have another hike in September, but that after, they should be extremely carefully continuing because basically, a lot of industries are suffering. Many people expect a 2024 that would see an evening on that part. I can tell you, we have planned for all scenarios, and what is quite important is to show agility and to adapt.
I will not coming on a 2024 scenario. We still have many challenges between, you know, before 2024, as we had at the beginning of the year, and we will continue to manage them by having scenarios that are ready to be rolled out, to adjust to the continuing change in reality.
Yes, sir. Many thanks.
Thank you. Francesca, next question, please.
Okay. Our next question comes from Lynn. Your line's now open.
Yes, good morning. I have two questions. The first one is on the occupancy rate of the offices. I've noticed a small drop, and I was wondering what your current view is on the take-up of new leases in Brussels.
Yes. Well, the, the letting activity is very strong. I review it two days ago with the Elise, you know, the letting activity is really strong, so we have no surprise on this. The, the slight decrease in occupancy that you see is mainly the mathematical impact of the disposal of some assets. You may see that again in the coming quarter, because basically, of course, we have to recompute this again with, I would say, the remaining assets, and, you know, depending on the occupancy of an asset that has been sold. You know, sometimes we sell an asset which is maybe 90% occupied at the time of the sale, but three months later, it, it drops to 45. We had reported, of course, the latest occupancy.
That's why you will have a little bit of volatility in the office occupancy rate, because of the acceleration of our divestment in offices. More generally, because your question also relate to the market. Well, you know, what I hear, and I had yesterday a discussion with some broker for Europe in general, and basically what they hear, that a lot of companies are basically fighting to, again, increase the level of occupancy of people going back to the office, certain with drastic measures.
It seems that the atmosphere among CEOs in Europe, and there is no difference in Brussels, is saying, you know, now it's time to increase, still keeping flexibility, because flexibility is clearly part of the new reality, but making sure that there is a clear occupancy of the offices a few days per week by almost all employees.
Okay, as a result of the increased demand, how do you see the rent per square meter evolve, in 2023 and going forward into 2024?
Well, the indexation is clearly, playing at full, so, we report absolutely no incident, on that part. The indexation is being passed to tenant, and, from that angle, there is absolutely, no, surprise. On the market, itself, we don't hear any, I would say, sad stories, about this. Again, since the, letting activity, is quite strong. There is no, change of mood, I would say, that would need to be, you know, taken into account for the time being.
Okay, clear. Then maybe the last question, it's on the healthcare assets in Brussels. I was wondering if you had an update on the licenses for private operators.
It has been, so you are referring to the decree of the Brussels government to...
Yes.
take out the license for unoccupied bed?
Correct. Yeah.
Okay. It's being challenged in court by several parties. You know, I guess that during the summer there will be not a big hearing on this, but it's, it's being challenged in court. We hear from lawyers that they are confident. You know, to be honest, I don't have personally a view on the technical analysis, but it's clearly being challenged in court.
Okay. Thank you.
Welcome. Thank you, Lynn. Next question, please.
Our next question comes from Eduardo. Your line's now open.
Thank you, and good morning. My first question is on the like-for-like growth of 6.4%. Could you elaborate a little bit on the renegotiations and departures as well, sort of, is it related to healthcare, office? Which geographies or operators are involved?
Well, in, in offices, you know, basically, of course, as you know, the standard duration of lease are shorter, which is usually three, six, nine years, as which is the market standard here in Belgium and, and more specifically in Brussels. There is no, I would say, you know, additional pressure because of home working that which would make the square meter cheaper. I think tenants are spending clearly more money in refurbishing or putting their own brand in the more vivid way, in the way they accommodate the offices. It's striking when it's, you know, you don't need anymore to go to the Netflix office here in Brussels, which is probably one of the most, I would say, attractive one.
You see many, you know, regular corporate, in, you know, trying to make the environment most attractive, also to have people back to the office, but that's basically on their own pocket. We are, as a landlord, we are not clearly involved in this. As far as healthcare is concerned, where, where, of course, it's long-term contract, so we are not in the middle of a big, I would say, renegotiation wall. You know, that's basically the ongoing part. Of course, in Germany, there are a bit more, I would say, discussion with some operators asking a bit of flexibility, but still, you know, keeping the basic commitment there.
Of course, as a, you know, truthful partner, we hear and look at this, on a case-by-case approach with, of course, the exception of the very few insolvency cases that needs to be managed in a more active way.
Thank you. Actually, that, that brings me to my second question. I appreciate Curata is, is a small part of your portfolio, but just in, in practice, now that you've sort of released the Curata's assets, how, how does it work? Do, do you keep the same tenant in place? Do you decrease the rent or similar rent-
Yeah.
different sort of
Yeah.
lease structure?
Well, it really, you know, depends on a case-by-case basis. If you take the example, of Curata, basically, you know, we discuss with, you know, the management, basically, what are, their views. In the case at hand, there are four assets. Three were considered as, by the management, as really, worth to continue, for the future. One, there has been discussion, there has been, brainstorming whether a new operator, could take, these assets. Sometimes it's not the preferred scenario of, I would say, the operator as well. After all the discussion, and you will appreciate that we had...
We were only a small player for the full Curata restructuring. Basically, we continue ahead with three assets with a short-term incentive to let them basically waiting against, mainly due to an occupancy issue with some adjustment. For one of the three assets, there are still discussion, maybe with a new operator. It's basically quite a dynamic process. For Curata. Probably we hear that they should go out of insolvency somewhere at the end of the summer. It's, you know, it's very difficult to make any prediction there.
Perfect. Thank you so much.
Thank you, Eduardo. Should we proceed with the next question, speakers?
Thank you.
Okay, our next question comes from Celine. Your line is now open.
Hi, Jean-Pierre. I, I have two questions, please. I'm gonna take them one by one. The first one is, I'd like to understand your debt neutral strategy and how it impacts earnings going forward. We're thinking about EUR 300 million investments against EUR 300 million disposals. Can you remind us, the yield on cost on the pipeline and the yield you're disposing assets at? That would be my first question.
Yeah. The average yield on cost of the pipeline is around 5%. You know, this is the case for the EUR 300 million we are doing today. For the yield on divestment is usually higher because we are disposing assets, you know, mostly outside of CBD, but there are also some CBD assets. Really, again, it's, it's, there, there is not really an average there. You have to look asset by asset, but it's clearly north of 5%.
Does that not worry you, that it is actually destroying cash flow?
Well, I think one has to be consistent. You cannot, at the same time, de-risk your portfolio and then suddenly say, "Oh, you sold something, what about the fact that it was a, a nice yield?" I think if we sell assets, it's because basically, you know, we still consider that the strategy that we had clearly articulated back in 2018 is still a very valid one. You know, I appreciate that, the, the letting activity of the offices, is still very good. I think, you know, as far as offices is concerned, what is important for us is to divest, at, at the right time and not too late. I think, also we hear what our shareholders, are, and investor are telling us. Of course, you are totally right.
Divesting an asset at a high yield creates, you know, an impact on EPS that we also have to take into account, but that basically there is no free lunch there. You know, you have to de-risk your portfolio and basically manage it.
Okay, understood. The second question is, can you do more secured debt going forward?
Yes, but if you, you know, basically, today, there is no need for. If you look at our profile of refinancing needed in the coming years, I remind you that for this year, there is no refinancing that needs to be done. If you look in the slide over the refinancing 25- 27, you see that the amount are quite modest. For us, there is no need of doing it. I think we are extremely happy that we did this benchmark bond just a few days before this whole crisis started. I think we are well equipped for the storm in terms of both credit line financing and hedging, of course, which is today, probably a more difficult topic than just securing credit line.
Again, with this very valuable hedging we have in our portfolio, it does not bring us in a zone where, as you know, some of our colleagues, difficult refinancing story has, is coming closer and closer, in 2024. That's also probably why S&P is quite relaxed about our financing profile.
Thanks so much, Jean-Pierre.
Thank you.
Once more, participants, to ask a question, just please press star one, and then star two to withdraw it, if you wish to have it withdrawn. Our next question comes from Amal. Line's now open.
Good morning, Jean-Pierre. Thanks for taking my question.
Hello, Amal.
Hello, I have two questions. The first one relates to the development pipeline in the context of decreasing cost of construction. Do you have any room to renegotiate the contract in order to improve the development cost?
Well, you know, frankly speaking, the priority here, because again, you cannot have, everything. You know, that the operator, the developer are facing and have faced already significant cost, increase. Our focus is more to keep the contract as they were negotiated with fixed costs-
Mm-hmm.
not to reopen this question. As you know, on the market, there, there are many developers that are also in a difficult position. We are talking also about prime assets with, in terms of energy performance, state-of-the-art equipment. You know, the magnitude of our pipeline after this year of EUR 200 million is not a huge needer and not jeopardizing, basically, the future of Cofinimmo. Our focus is on executing this pipeline as it was negotiated and contracted. Unfortunately, most of these developers are not in a position today to discuss with us new pipeline, because construction costs are not yet stabilized, and because, you know, price are also a bit in a gray zone.
We are not refilling yet, the pipeline for the future.
Okay, very clear. That's a follow-up question. Do the rents in the development pipeline, the, the rents that you, you have signed with the operators, are they indexed during the construction phase?
Depends. It's really on the case by case. If it's not indexed, that it means that the price has taken this into account. We look at the whole economics, you know, from the day we commit and how it is translated, whether it's in, in CapEx, purchase price, or whether it's a lease adaptation. It's also, you know, it's a three-party negotiation. You have the developer, you have the tenant, and you house. Depending on also the, I would say, the requirement of the tenant, you might have an indexation indeed, from the beginning. It might be later, it might depend on some incentives. It's really a case-by-case approach. For us, what is important is the global economics and return on the project itself.
Okay. Very clear. Thank you. A second question, perhaps, on the German healthcare operator. I was a bit surprised by the confidence, because when we read newspaper, it seems like situation is very, very difficult today. I was also surprised to hear that you don't have more recent data on the operational figures for the German health operators. I was thinking that you could have them on a quarterly basis.
Yeah.
Um-
We receive, you know, as usual, we receive data about the operation site by site. For the vast majority of those sites, when we get the data, it's after the approval by the General Assembly, so we start receiving more in September for the previous year. That's has been always like this, and I think this is the case for colleagues as well, because this number, which by the way, are not public. Yeah, you know that.
Mm-hmm.
Operators are not due to publish the result site by site. It's coming with this time. Of course, in between, we have property manager visiting the assets, which allow us already to ask question before we get the official data. You know, the motto in this house is that receiving this data should not be a surprise, because we should be close enough to operator to already have a feeling in the direction in which it is going.
Okay. Okay. If I may make a comparison with the retail sector, for example, where indeed it was not, a common practice to, to share as earlier. For example, it has become now. Don't you think that there might be now a change in the practice in order to, let's say, give more transparency?
Yeah
on the operations? Is it something you're working on or discussing with the operators?
It, it has been, you know, I would say since 2018, a topic that we are discussing with the operators. You know, and, and, you know, I must admit that, at least for me personally, it was a no-brainer, and I've heard many operators advocating for it. Basically, there is one element, and, and you know that, sometimes the argument about it's a very, business sec, almost a business secret, meaning for competitive reasons. Today, I think that some operators are afraid that given the fact that it's a subsidized activity, that if they would disclose their figures, that, and, you know, assuming, of course, that these figures are healthy, this data can be a trigger for some government or region to revisit the level of subsidy.
It's a very, I would say, real topic, because there has been some example in the past where, you know, when there has been public transaction, if I take a few years ago, when Alloheim took, was taken over by Nordic Capital, they, they reported EBITDA figures on the market, and it was a very hot debate in Germany for at least a year. Why? Because the profitability of the public house and the non-for-profit house were, was, you know, really not in the same range, not to say negative. You know, I would take another example, which is very recent. You may have read, I think it was yesterday or the day before, in Les Échos in France, that the French government is releasing a exceptional, I would say, state aid... to the EHPAD, so the nursing home.
When you look closer, you see that it's only for the public and the non-for-profit sector. Of course, the, the, you know, beyond whether it's, you know, something which will sustain the challenge of the legal review, one could wonder why is there a, a topic of sustainability of French public and non-for-profit nursing home, which is not which cannot be read across for the private nursing home. There is one, clearly, it's not a secret in France, that there is a, a difference in profitability, and basically, there are two main reasons for this. The first reason is that this sector, non-for-profit and public house, tend to employ a much higher ratio of personnel, based on, you know, of course, criteria, criteria, the profitability should not be present.
The second one, which is even more weighting on their profitability, is the fact that you have some social resident, meaning a resident that basically cannot afford to be in a nursing home, and that are totally financed by the state. In the public and in the not-for-profit houses, this type of tenant are, or resident, better say, are the vast majority of resident customer, if you want, of those houses. In the private house is a minor, minor, minor part, which explain also the different profitability. You know, for, for government to enact rules about transparency, about profitability, I fully agree with you. First reaction is to say that would be better for everybody. It means that government will have...
Also have to disclose, the same KPIs for not-for-profit and public house, a topic that, of course, private operator would be very happy to see, to demonstrate that basically the fact that they do a profit is also very positive for society. On the other hand, they are a bit afraid that it will trigger another debate and basically put everybody to the net zero level, which of course, is not a very appealing one. I'm sorry that I'm taking a bit time to answer this question, but it's to say that it's, it's not, at the end of the day, a, a very easy topic.
No, thank you very much, Jean-Pierre. It's very clear, and I, I get your point. Indeed, it's not a basic segment or, or business, it's a linked with the, the society and, and public service.
Yeah.
It's very, very clear. Thank you very much. Thank you very much for answering the question.
Welcome.
Thank you, Amal. That's the last question on the queue. Speakers, you may continue.
I think, if there are no more questions, I would like to thank you for your time, and I wish to those of you who have not taken yet a summer break to enjoy it. It's an interesting year, in the Brit sense, I would say. We will continue to work hard to make Cofinimmo successful. Thank you for your attention. Goodbye.
That concludes today's call. Thank you all for joining. You may now disconnect.